Administration of retirement plans places the plan sponsor, the plan administrator and the plan fiduciaries (e.g., advisors, trustees, etc. . . . ) in a fiduciary relationship with the plan's participants and their beneficiaries. This particular fiduciary relationship is highly regulated by multiple government entities, such as the IRS or Department of Labor. These regulatory entities create thousands of pages of regulations related to the management of plans. To make matters even more complicated there are many different types of retirement plans. Traditionally, companies commonly offered defined benefit plans, also referred to as pension plans. More recently, companies have been turning towards defined contribution plans, such as 401a, 401K, 403b and 457 plans.
Some of the government regulations may apply to all retirement plans, but most deal with only a specific portion of the available retirement plan types. This mass of intertwined regulations makes the management of a retirement plan a daunting task for even the most seasoned professional. To make the situation even more complicated the recent financial crisis is likely to further increase the volume and frequency of changes to the governing regulations.
One example of government regulation is the Employee Retirement Income Security Act of 1974 (ERISA). (Pub.L. 93-406, 88 Stat. 829, enacted Sep. 2, 1974.) ERISA is a federal statute that establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries. ERISA requires the disclosure of financial and other information concerning the plan, by a fiduciary responsible for administration of the plan. ERISA provides protection by establishing standards of conduct for plan fiduciaries and by providing for appropriate remedies and access to the federal courts.
ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are found in the United States Code (mainly in the section on Internal Revenue Service) and ERISA itself. Responsibility for the interpretation and enforcement of ERISA is divided among the Department of Labor, the Department of the Treasury (particularly the Internal Revenue Service), and the Pension Benefit Guaranty Corporation.
While ERISA encompasses a wide range of regulations and requirements relating to the administration of a retirement plan, other regulations from the IRS for example can impose additional requirements. This complicated structure of government regulation, court rulings interpreting the regulations, and other influences create a mine field for retirement plan administrators and fiduciaries attempting to comply with her fiduciary responsibilities.